It was bound to happen. 2 big stories over the past 72 hours: (1) US NFP on Friday disappointed printing +151k vs +180k expected and +255k July and (2) the US, China and Japan have all made credible “threats” about the UK’s position (vis a vis trading) following the Brexit vote.

So all is NOT as it appears. Seems my comments last week have now come to fruition and the FED will have some serious debating ahead of their meeting on 21st NFP came in at a mere +151k leaving the FED scratching their heads and thinking if US rate hikes are indeed “data dependent” then on that data alone they will have to delay hiking rates. I have said this many times, I truly believe the FED MUST delay hiking at the forthcoming meeting and allow more time for the US economy to regularize and normalise (not to mention the US elections) before hiking. It is for this reason I believe the FED must and should delay hiking rates until the 14th December at which point the FED will have another 3 data points to reflect and act upon, and also know who the new commander and chief is come January 2017. If the economy does indeed show signs of stabilisation over the coming months I will be looking for a 0.50% hike rather than 0.25% which most people think. By hiking 0.50% they are able to hike to their desired 1% by year end and in so doing provide a boost to global stocks (good for pensions and investors) and give the USD the platform to rally towards PARITY vs the EUR going into 2017.

Finally some negative consequences to Brexit. President Obama kicked things off by saying the UK would not be the priority for a USD trade deal (i.e., please join the back of the queue) which was then followed by Japan who issues an unprecedented 15 page warning about the consequences of Brexit. The icing on the cake came from China and tensions boiled over regarding their involvement in UK nuclear power.

Let’s start with the USA. Well let’s be honest the US would rather deal with 500 mio (EU) than with 65mio (UK) people. That would simply mean the UK will have to wait until the US has concluded their agreements with the former bloc before considering throwing the scraps to the UK. Business is business and I am afraid those 17.4mio people that voted leave should have considered their future more wisely.

Even before the dust had settled Japan threw their curveball stating that a full exit from the EU will probably lead to corporate exits form the UK unless the current financial privileges are maintained in full. Half of Japans investments in the EU comes to the UK with the likes of Nissan, Honda, Mitsubishi, Nomura, Daiwa and MUFG employing tens of thousands of people. If these corporations made good on their threat and left to the EU the void would be catastrophic for the UK economy. I wonder how many of those employees voted to leave. Some sleepless nights ahead I am sure. The Japanese report conclude “Japanese businesses with their European headquarters in the UK may decide to transfer their head-office function to continental Europe if EU laws cease to be applicable in the UK after its withdrawal. In light of the fact that a number of Japanese businesses, invited by the government in some cases, have invested actively to the UK, which was seen to be a gateway to Europe, and have established value-chains across Europe, we strongly request that the UK will consider this fact seriously and respond in a responsible manner to minimise any harmful effects on these businesses.”

And finally China…PM May is said to have angered the hosts (and the French) by placing the Hinkley point nuclear project under review. The reason, security concerns over Beijing’s involvement. It would appear that the PM is looking to speak to other world leaders and see what they have to offer before committing to the Chinese/French deal. The PM was hoping the Chinese would take a passive investment rather than a full partner active one.

Now you probably think I am a little over the top here but something strange happened during the referendum. For weeks leading the 23rd, there was one person who was visibly absent from the podium. Yes you guessed it, MS May. She was nowhere to be seen and not a peep to add. Which got me thinking. Is the PM a LEAVE voter!! I would think YES. Given ex PM Cameron already had Ian Duncan Smith, Boris and Gove to content with (not to mention a Labour party that didn’t care) I honestly think Mr Cameron made some agreement with Ms May to “disappear” during the run in to the referendum in return for the TOP JOB once he quit in 2020 (assuming remain won). It is for this reason that I think my conspiracy theory was right given that the turnaround between Cameron leaving and May coming in was well lightning fast. Something very fishy is going on.

As for the GBP this week, I said this last week. Despite the doom and gloom above I continue to think the GBP could drive higher to 1.36-1.38 at least. Sentiment continues to shine given we have not started Brexiting just yet.

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